The Thai Currency Crisis: Financing Constraints, High Fixed Costs, and Corporate Governance

Robert Dekle (), Cathy Karnchanasai and Pongsak Hoontrakul
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Cathy Karnchanasai: Bank of Thailand Monetary Policy Department Bangkhaomphrom, Bangkok Thailand
Pongsak Hoontrakul: Chulalongkorn University; SASIN Phyathai Road Bangkok Thailand

Asian Economic Papers, 2005, vol. 4, issue 2, pages 60-87

Abstract: We examine the role of financing constraints in depressing output during the Asian financial crisis, using Thai firm-level data. From an output decline of 3.7 percent in our sample in 1998, we find that tightening financing constraints contributed to lowering output by 1.7 percent. We also find evidence of high scale economies or high fixed costs in Thai industries. With high fixed costs, small changes in unit costs or financing costs can lead to large changes in output. We interpret the high fixed costs as evidence of overinvestment prior to the crisis. Copyright (c) 2006 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

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